November 15, 2019
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first_imgAfter finalising the paperwork for the first phase of the privatisation process, the Airports Authority of India (AAI) revealed a second phase on the cards in a briefing with a plan to privatise 20-25 airports. AAI Chairman Guruprasad Mohapatra asserted confidence that the second phase of privatisation will witness increased participation from foreign airports. While it is important to draw up future plans and attract foreign players to develop a consortium of airports across India, sorting out the first phase of privatisation takes precedence. In fact, it is the very success of the first phase which shall determine interest in the process on bidders’ part, as the AAI Chairman cited with the example of Munich and Dublin airports who had shown tremendous interest but “probably required more confidence” and were waiting to see the outcome of the first round of privatisation. But bidders’ interest does not only lie in how well players, or in this context a single-player, manage the Organisation and Management (O&M) of airport besides development. It gives equal weight to the bidding process and the criteria held by AAI in deciding whom to award the contract. Criteria, above all, take precedence since AAI has to keep essential prerequisites such as per passenger fee and total project cost as well as prior experience in O&M of airports. In this regard, the first phase of privatisation assumes even more importance and is supposed to set a benchmark for future biddings and development. The pertinent question is, did it? The first phase of privatisation began back in November 2018 when following the Union Cabinet’s in-principle nod to privatise six airports owned by AAI, the government panel for public-private partnerships–PPP Appraisal Committee (PPPAC)–met to recommend the proposal for final approval on Dec 11. Responsible for deciding the criteria and norms upon which the bidding process will be conducted, PPPAC brushed aside key recommendations to improve the criteria for selecting bidders given by the Department of Economic Affairs (DEA) and NITI Aayogy in favour for decisions taken by Empowered Group of Secretaries (EGoS)–constituted by the Union Cabinet to take decisions on any issue falling beyond the scope of PPPAC. These key recommendations included prerequisites of O&M as well as development experience along with total estimated project cost which would aid in determining the capacity of interested players. With the tender floated by AAI on December 14 for six airports viz., Lucknow, Ahmedabad, Jaipur, Guwahati, Thiruvananthapuram and Mangaluru, AAI, in February 2019, declared Adani Enterprises Limited as the highest bidder for all six airports. And, on July 3, 2019, the Union Cabinet gave its nod for leasing three of these airports for on a long-term lease of 50 years. With Adani bagging all six airports, DEA’s recommendation of incorporating a clause that “no more than two airports to be awarded to the same bidder duly factoring the high financial risk and performance issues” took an unceremonious exit. In fact, DEA backed its recommendation by citing how at the time of privatisation of Delhi and Mumbai airports, GMR was the only qualified bidder, yet both airports were not awarded to it. Countering DEA’s recommended clause was a unanimous decision from EGoS citing that “no restriction needs to be placed on the number of airports to be bid for or to be awarded to a single entity”. Not just this but NITI Aayog’s suggestion to press on the need to have players with prior O&M experience was also trumped by PPPAC quoting EGoS’ decision that “prior airport experience may neither be made a prerequisite for bidding nor a post-bid requirement”, since it will enlarge the competition for brownfield airports which are already functional. Now while it is fine by PPPAC to exercise autonomy in deciding norms, it should be duly noted that EGoS was constituted to take decisions on any issue which falls beyond PPPAC’s scope but as per PPP guidelines, O&M standards fall right under PPPAC’s purview; there was no need to consult EGoS over this. The criteria-deciding process did not yield effective norms to restrict Adani’s bid for all six airports up for privatisation in the first phase and eventually, it bagged all of them–though three of those await a decision by the government. Also Read – A compounding difficultyAbsence of a cap and prior O&M experience recommended by DEA allowed Adani–who does not have O&M experience–to bag all six airports, which does not exude much confidence for bidders looking forward to the second phase. Lack of norms which were present during the privatisation of Delhi, Mumbai, Bengaluru and Hyderabad airports who each had to find a foreign player with O&M experience to comply with RfP norms suggest a casual attitude from PPPAC and draws criticism for allegedly favouring one player over others. It is to be noted that in its pursuit to draw foreign airports to bid in the second phase of the privatisation, AAI must ensure strict norms with an unbiased environment because without a level-playing field, potential bidders might exercise restraint which will adversely affect the prospects of developing these airports. This might leave the government with no other option but to award a dozen airports to Adani in the next phase, which is not exactly impossible given the exploits in the first phase but definitely contentious in public view.last_img

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